New system offers business greater security
Consolidation of the various state and federal property security registers into a single registry of security interests will be welcomed by any business that retains an interest in an asset after it has become the property of a customer; one such example is before a final invoice is paid.
The single registry of security interests, effective from October 2011, will not just provide a much-needed simplification of the system, but will also expand the assets that can be included on the register. This will provide a greater level of security for businesses.
Under the new system, arrangements such as hire purchase agreements and leases, and retention of title claims, will now be included on the register.
Security interests are defined as ‘an interest in property provided for by a transaction that secures payment or performance of an obligation’.
According to the Personal Property Securities Act 2009 (Cwlth) reform, this may include intellectual property (such as patents), intangible property (such as contractual rights or licences) and financial property (such as investment instruments, bonds, etc).
Both ‘consumer’ property, such as items used for personal purposes such as a car under lease and ‘commercial’ property, such as trading stock, plant and equipment, are covered.
Another change under the new system is that ‘fixed’ and ‘floating’ charges will no longer exist. They will instead be known as:
- security interests which attach to a circulating asset (floating charge)
- security interests which attach to a non-circulating asset (fixed charge).
The changes will ultimately provide a much simpler system for registering securities. Businesses that deal with customers throughout Australia will no longer need to record each customer on the relevant state-based registry. It will also make it much easier for liquidators to assess the rights of suppliers and debtors to companies they are administrating, and speed up the process of returning money to those businesses.
In the short term, however, the changes will create some paperwork for businesses. They will need to redraft their terms of trade to take into account the single register.
It is important for businesses to familiarise themselves with the changes and the new terminology, and ensure they follow procedures correctly to retain title over their property.
For more information on these changes, contact your Chartered Accountant.